Though Viacom hoped that the entertainment megalith's absorption of Blockbuster would be a hit with Wall Street and a major pull at the cash register, its $8.4 billion investment had until recently been a flop. Though the world's No. 1 video rental chain claims some 64 million card-carrying customers, failed synergy with parent Viacom, upper management revolving doors, and a floundering industry have all combined to put the venerable Blockbuster into a tailspin. More recently, Blockbuster's status has improved, due mostly to the speedy distribution of new releases and an increased focus on customer service. Today, Blockbuster controls roughly a third of the video rental market.

Selling off Blockbuster

In August 1999 Viacom sold of a portion of Blockbuster in an IPO, with plans to sell the remainder soon thereafter. Following the annoucement of the Viacom/CBS merger neither CBS CEO, Mel Karmazin, nor Viacom CEO, Sumner Redstone, were excited about following through with the spin-off. Both cited low stock prices for the change of heart. The Wall Street Journal commented that, "a recovery in Blockbuster's stock price could put the deal back on track." But the stock headed in the opposite direction instead. Viacom had said it would complete a spinoff when the stock reached $20 a share. At the time of the annoucement (December 1999) the stock was trading for $16. By June 2000 the stock was trading below $10.

eRentals

In October 1999 Blockbuster announced plans to rent videos online with a delivery system to be determined. In addition Blockbuster said that it was looking into various means of transmitting of movies over the Internet. In anticipation of an era dominated by Internet distributed electronic entertainment, CEO John Antioco appears to be utilizing the Blockbuster brand name and customer base to forge a viable online business. In February 2000 the company announced it would become a "technology-neutral" destination where consumers can go to search store inventory, reserve films online, pre-pay, and eventually watch movies via download. Analysts believe video-on-demand is eventually going to take at least half the market share away from brick-and-mortar stores.

Piece of the pay-per-view pie

In May 2000 Blockbuster jumped onto the pay-per-view bandwagon when it announced a multi-year marketing alliance with DirecTV. Under the terms of the deal, DirecTV gains a new distribution channel through Blockbuster's video stores. DirecTV also plans to co-brand its pay-per-view movie service using the Blockbuster name. Many analysts commented that the alliance between one-time home-entertainment rivals signals Blockbuster's acceptance that pay-per-view will continue to grow in years to come.

Joining together energy and entertainment, Blockbuster announced a 20-year exclusive agreement with the broadband division of energy company Enron to deliver movies on demand to homes through DSL lines. The venture competes with the pay-per-view services from cable companies and satellite broadcasters.

Revenue sharing controversy

In 1998, Blockbuster teamed up with movie studios by sharing revenue in exchange for better access to new releases. Independent retailers cried foul, and in 1999 they took Blockbuster to federal court, contending that Blockbuster enjoys "uniquely favorable terms" in its revenue-sharing agreements with the studios. As of June 2000 the litigation is still pending.

Getting Hired

Since Viacom is a highly diversified conglomerate, Blockbuster handles the majority of its own hiring and recruiting. Applicants can contact the Human Resources department of the specific company at which they want to work. The parent company's employment Web page, located at www.viacom.com/x/jobs_main.html, has links to information on all Viacom subsidiaries. Blockbuster also posts job listings on non-Viacom websites.

Our Survey Says

Though Blockbuster has been described as "very buttoned down" and a distinct contrast to Viacom's "lax, hip stylings," a "young" and "energetic" culture is becoming more prominent throughout the company. Frequent, "extravagant" social events provide employees with the chance to "blow off steam and network simultaneously." Employee turnover is "astronomically high," which "fosters corporate instability." Some leave because of a "rigid" pay scale that provides for time-based, but not merit-based, increases.